Centamin Resumes Trading – Sell

PUBLISHED: Nov 01 2012 @ 06:01 | Comments (0) | More info about Tom Winnifrith

Shares in fully listed gold miner Centamin (LSE:CEY) have resumed trading this morning and are currently 74p. One can make a legitimate case saying that its assets are worth 150p per share. But then there is the reason they were suspended on Tuesday and that is why I would sell as I explain briefly below.

The situation with regard to Centamin’s Sukhari mine is still not clear. Centamin says that it has not seen the verdict of the Court yet but claims that it understands that it still has title and, anyhow, that the Court has no Jurisdiction anyway. The Judge seems to think he does have jurisdiction and is quoted as saying that Centamin has lost its title absolutely. Who knows?

And that is my point? No-one does. There are three scenarios here. In a best case scenario the shares will trade at a huge discount to fair value forever given the nature of life in Egypt today. In a worst case scenario the asset is lost and the shares are worth 5p (i.e. net cash). I do not think the worst case scenario will happen but who knows?

You can read a detailed assessment of all three scenarios here

There are far safer gold producing stocks to own offering as much upside but with far less downside risk. I would advise selling Centamin this morning and switching into a safer gold play.

For five such big upside lower risk gold stock ideas go here

Libertarian investment writer Tom Winnifrith writes extensively for a number of US and UK financial websites. All of that material appears on his own blog, which also carries his extensive original non financial material, at TomWinnifrith.com – for alerts on all Tom’s writings follow him on twitter at @tomwinnifrith

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